SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)
[X]  Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934

     For the quarterly period ended: September 30, 2006
                                     ------------------

[ ]  Transition  report  pursuant  to  Section  13 or  15(d)  of the  Securities
     Exchange Act of 1934

     For the transition period from ________ to ________

                           SEC File Number: 000-50467
                                            ---------


                         SYNERGY FINANCIAL GROUP, INC.
                         -----------------------------
             (Exact name of registrant as specified in its charter)

            New Jersey                                           52-2413926
            ----------                                           ----------
State or other jurisdiction of                                (I.R.S. Employer
  incorporation or organization)                             Identification No.)

 310 North Avenue East, Cranford, New Jersey                       07016
 -------------------------------------------                       -----
   (Address of principal executive offices)                      (Zip Code)

                                 (908) 272-3838
              ----------------------------------------------------
              (Registrant's telephone number, including area code)


         Check whether the registrant:  (1) has filed all reports required to be
filed by Sections 13 or 15(d) of the Securities  Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days. Yes X No ___

Indicate by check mark whether the Registrant is a large  accelerated  filer, an
accelerated  filer, or a  non-accelerated  filer. See definition of "accelerated
filer" and "large  accelerated  filer" in Rule 12b-2 of the Exchange Act. (Check
one): Large accelerated filer __ Accelerated filer X Non-accelerated filer __

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes ___ No X_

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Number of shares outstanding of common stock as of October 31, 2006:

$0.10 Par Value Common Stock                            11,382,143
----------------------------                            ----------
         Class                                      Shares Outstanding

<PAGE>

                 SYNERGY FINANCIAL GROUP, INC. AND SUBSIDIARIES

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                        Page
                                                                                        ----
<S>        <C>                                                                          <C>
PART I        FINANCIAL INFORMATION
------        ---------------------

Item 1.       Financial Statements  (unaudited)

              Consolidated Balance Sheets as of September 30, 2006  and
                  December 31, 2005........................................................1

              Consolidated Statements of Income for the three and nine months ended
                  September 30, 2006 and 2005..............................................2

              Consolidated Statement of Changes in Stockholders' Equity for the
                  nine months ended September 30, 2006.....................................3

              Consolidated Statements of Cash Flows for the nine months ended
                  September 30, 2006 and 2005..............................................4

              Notes to Consolidated Financial Statements...................................5

Item 2.       Management's Discussion and Analysis of Financial Condition
                  and Results of Operations...............................................14

Item 3.       Quantitative and Qualitative Disclosures about Market Risk..................23

Item 4.       Controls and Procedures.....................................................24


PART II       OTHER INFORMATION
-------       -----------------

Item 1.       Legal Proceedings...........................................................25

Item 1A.      Risk Factors................................................................25

Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds.................25

Item 3.       Defaults Upon Senior Securities.............................................26

Item 4.       Submission of Matters to a Vote of Security Holders.........................26

Item 5.       Other Information...........................................................26

Item 6.       Exhibits....................................................................26

Signatures................................................................................27

</TABLE>


<PAGE>

                 SYNERGY FINANCIAL GROUP, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                        (In thousands, except share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                              September 30,    December 31,
                                                                                  2006             2005
                                                                                  ----             ----

<S>                                                                        <C>               <C>
Assets:
Cash and amounts due from banks                                              $     5,108       $     4,635
Interest-bearing deposits with banks                                                 414             1,948
                                                                             -----------       -----------
Cash and cash equivalents                                                          5,522             6,583
Investment securities available-for-sale,
   at fair value                                                                  72,640            85,319
Investment securities held-to-maturity (fair
   value of $79,359 and $93,575, respectively)                                    81,582            95,621
Federal Home Loan Bank of New York
   stock, at cost                                                                 12,840            13,263
Loans receivable, net                                                            769,135           733,183
Accrued interest receivable                                                        3,785             3,313
Property and equipment, net                                                       19,504            18,570
Cash surrender value of bank-owned life insurance                                 21,581            13,138
Other assets                                                                       6,655             4,897
                                                                             -----------       -----------
     Total assets                                                            $   993,244       $   973,887
                                                                             ===========       ===========

Liabilities:
Deposits                                                                     $   635,329       $   606,471
Other borrowed funds                                                             254,750           266,600
Advance payments by borrowers for taxes and insurance                              2,737             2,215
Accrued interest payable on advances                                                 674               611
Other liabilities                                                                  3,293             2,740
                                                                             -----------       -----------
     Total liabilities                                                           896,783           878,637
                                                                             -----------       -----------

Stockholders' equity:
Preferred stock; $0.10 par value, 5,000,000 shares
   authorized; issued and outstanding - none                                           -                 -
Common stock; $0.10 par value, 20,000,000 shares authorized;
   Issued - 12,509,636 in 2006 and 12,471,481 in 2005
   Outstanding  - 11,382,143 in 2006 and 11,545,881 in 2005                        1,251             1,247
Additional paid-in-capital                                                        84,447            85,959
Retained earnings                                                                 33,953            32,794
Unearned ESOP shares                                                              (4,770)           (5,282)
Unearned RSP compensation                                                              -            (2,567)
Treasury stock acquired for the RSP, at cost;
   271,613 in 2006 and 363,037 in 2005                                            (3,086)           (4,124)
Treasury stock, at cost; 1,127,493 in 2006
   and 925,600 in 2005                                                           (14,125)          (11,426)
Accumulated other comprehensive loss, net of taxes                                (1,209)           (1,351)
                                                                             -----------       -----------
     Total stockholders' equity                                                   96,461            95,250
                                                                             -----------       -----------
     Total liabilities and stockholders' equity                              $   993,244       $   973,887
                                                                             ===========       ===========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                      -1-

<PAGE>

                 SYNERGY FINANCIAL GROUP, INC. AND SUBSIDIARIES
                        Consolidated Statements of Income
                      (In thousands, except per share data)
                                   (unaudited)

<TABLE>
<CAPTION>

                                                                    For the Three Months           For the Nine Months
                                                                     ended September 30,           ended September 30,
                                                                     -------------------           -------------------
                                                                      2006         2005              2006         2005
                                                                      ----         ----              ----         ----

<S>                                                              <C>           <C>              <C>          <C>
Interest income:
   Loans, including fees                                          $  12,199     $  9,868         $  35,456    $  27,210
   Investment securities                                              1,577        1,934             4,998        6,448
   Other                                                                181          157               526          391
                                                                  ---------     --------         ---------    ---------
     Total interest income                                           13,957       11,959            40,980       34,049
                                                                  ---------     --------         ---------    ---------
Interest expense:
   Deposits                                                           5,671        3,292            15,085        9,025
   Borrowed funds                                                     2,627        2,517             7,598        6,347
                                                                  ---------     --------         ---------    ---------
     Total interest expense                                           8,298        5,809            22,683       15,372
                                                                  ---------     --------         ---------    ---------
     Net interest income before provision for loan losses             5,659        6,150            18,297       18,677
Provision for loan losses                                               200          392               868        1,314
                                                                  ---------     --------         ---------    ---------
     Net interest income after provision for loan losses              5,459        5,758            17,429       17,363
                                                                  ---------     --------         ---------    ---------

Other income:
   Service charges and other fees on deposit accounts                   557          550             1,570        1,562
   Net gain (loss) on sale of investments                                 -            8                 -          (26)
   Commissions                                                          211          211               625          660
   Other                                                                188          185               521          468
                                                                  ---------     --------         ---------    ---------
     Total other income                                                 956          954             2,716        2,664
                                                                  ---------     --------         ---------    ---------

Other expenses:
   Salaries and employee benefits                                     3,080        2,784             9,204        8,261
   Premises and equipment                                               634          765             1,967        2,226
   Occupancy                                                            589          583             1,715        1,595
   Professional services                                                149          165               608          559
   Advertising                                                           81          262               341          677
   Other operating                                                      443          477             1,486        1,437
                                                                  ---------     --------         ---------    ---------
     Total other expenses                                             4,976        5,036            15,321       14,755
                                                                  ---------     --------         ---------    ---------
     Income before income tax expense                                 1,439        1,676             4,824        5,272
Income tax expense                                                      458          568             1,734        1,939
                                                                  ---------     --------         ---------    ---------
     Net income                                                   $     981     $  1,108         $   3,090    $   3,333
                                                                  =========     ========         =========    =========

Per share of common stock:
   Basic earnings per share                                       $    0.09     $   0.10         $    0.30    $    0.30
                                                                  =========     ========         =========    =========
   Diluted earnings per share                                     $    0.09     $   0.10         $    0.29    $    0.29
                                                                  =========     ========         =========    =========

Basic weighted average shares outstanding                            10,379       10,711            10,350       10,993
                                                                  =========     ========         =========    =========
Diluted weighted average shares outstanding                          10,874       11,102            10,824       11,390
                                                                  =========     ========         =========    =========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                      -2-

<PAGE>

                            SYNERGY FINANCIAL GROUP, INC. AND SUBSIDIARIES
                       Consolidated Statement of Changes in Stockholders' Equity
                              For the Nine Months Ended September 30, 2006
                                  (In thousands, except share amounts)
                                             (unaudited)
<TABLE>
<CAPTION>
                                                                                               Treasury           Accumulated
                                                                                                stock            comprehensive
                                    Common stock    Additional           Unearned   Unearned   acquired             income
                                   Shares      Par   paid-in-  Retained    ESOP       RSP      for the  Treasury    (loss),
                                   issued     value  capital   earnings   shares  compensation   RSP      Stock       net     TOTAL
------------------------------------------------------------------------------------------------------------------------------------

<S>                             <C>        <C>      <C>        <C>      <C>        <C>        <C>      <C>        <C>      <C>
BALANCE AT JANUARY 1, 2006       12,471,481 $1,247   $85,959    $32,794  $(5,282)   $(2,567)   $(4,124) $(11,426)  $(1,351) $95,250

    Net income                            -      -         -      3,090        -          -          -         -         -    3,090

    Other comprehensive income,
      net of reclassification
      adjustment and taxes               -       -         -          -        -          -          -         -        142     142
                                                                                                                             ------

Total comprehensive income                                                                                                    3,232

    Dividends declared                   -       -         -     (1,931)       -          -          -         -         -   (1,931)

    Common stock issued for
      options exercised             38,155       4       210          -        -          -          -         -         -      214

    Common stock held by
      ESOP committed to be
      released (74,718 shares)           -       -       576          -      512          -          -         -         -    1,088

    Other stock compensation
      plan activity, including
      tax benefits                       -       -       186          -        -          -          -         -         -      186

    Transfer due to adoption
      of SFAS 123(R)                     -       -    (2,567)         -        -      2,567          -         -         -        -

    Compensation recognized
      under stock plans                  -       -     1,121          -        -          -          -         -         -    1,121

    Purchase of treasury
      stock (201,893 shares)             -       -         -          -        -          -          -    (2,699)        -   (2,699)

    Common stock issued by
      RSP (91,424)                       -       -    (1,038)         -        -          -      1,038         -         -        -
                                ----------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 2006   12,509,636  $1,251   $84,447    $33,953  $(4,770)   $     -    $(3,086) $(14,125)  $(1,209) $96,461
                                ====================================================================================================
</TABLE>

        The accompanying notes are an integral part of these statements.

                                      -3-

<PAGE>

                 SYNERGY FINANCIAL GROUP, INC. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                                 (In thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                     For the Nine Months
                                                                                     Ended September 30,
                                                                                     -------------------
                                                                                   2006              2005
                                                                                   ----              ----
<S>                                                                            <C>              <C>
Operating activities:
  Net income                                                                      $  3,090         $   3,333
  Adjustments to reconcile net income to net cash
    provided by operating activities
  Depreciation and amortization                                                      1,110             1,139
  Provision for loan losses                                                            868             1,314
  Deferred income taxes                                                             (1,787)             (405)
  Amortization of deferred loan fees and costs                                        (110)              (81)
  Amortization of premiums on investment securities                                    387               679
  Net loss on sale of investment securities                                              -                26
  Release of ESOP shares                                                             1,088               920
  Compensation recognized under stock plans                                          1,121               607
  Increase in accrued interest receivable                                             (472)             (367)
  Increase in other assets                                                             (38)             (141)
  Increase (decrease) in other liabilities                                             505            (2,121)
  Increase in cash surrender value of bank-owned life insurance                       (443)             (373)
  Increase in accrued interest payable on advances                                      63               395
                                                                                  --------         ---------
    Net cash provided by operating activities                                        5,382             4,925
                                                                                  --------         ---------
Investing activities:
  Purchase of investment securities held-to-maturity                                     -           (12,536)
  Purchase of investment securities available-for-sale                              (4,607)           (2,084)
  Maturity and principal repayments of investment
    securities held-to-maturity                                                     17,112            21,819
  Maturity and principal repayments of investment
    securities available-for-sale                                                   13,968            28,846
  Purchase of property and equipment                                                (2,044)           (2,077)
  Sale (purchase) of FHLB stock                                                        423            (2,352)
  Proceeds from the sale of investment securities available for sale                     -            12,808
  Purchase of bank owned life insurance                                             (8,000)                -
  Loan originations, net of principal repayments                                   (42,887)         (120,186)
  Purchase of loans                                                                 (2,940)          (10,168)
  Proceeds from sale of loans                                                        9,117                 -
                                                                                   --------         ---------
    Net cash used in investing activities                                          (19,858)          (85,930)
                                                                                   --------         ---------

Financing activities:
  Net increase in deposits                                                          28,858            42,224
  Increase in short-term FHLB advances                                               7,300            61,475
  Proceeds from long-term FHLB advances                                             22,000            25,500
  Repayments of long-term FHLB advances                                            (41,150)          (36,939)
  Increase in advance payments by borrowers
    for taxes and insurance                                                            522               438
  Dividends paid                                                                    (1,816)           (1,600)
  Purchase of treasury stock for the RSP Plan                                            -              (766)
  Purchase of treasury stock                                                        (2,699)           (7,916)
  Common stock issued for options exercised                                            400                83
                                                                                  --------         ---------
  Net cash provided by financing activities                                         13,415            82,499
                                                                                  --------         ---------
    Net (decrease) increase in cash and cash equivalents                            (1,061)            1,494
Cash and cash equivalents at beginning of year                                       6,583             6,446
                                                                                  --------         ---------
Cash and cash equivalents at end of period                                        $  5,522         $   7,940
                                                                                  ========         =========

Supplemental disclosure of cash flow information:
   Cash paid during the period for income taxes                                   $  2,206         $   2,849
                                                                                  ========         =========
   Interest paid on deposits and borrowed funds                                   $ 22,747         $  15,767
                                                                                  ========         =========
</TABLE>

        The accompanying notes are an integral part of these statements.

                                      -4-

<PAGE>

                 SYNERGY FINANCIAL GROUP, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (unaudited)


1. BASIS OF FINANCIAL STATEMENT PRESENTATION

The  accounting   policies  followed  by  Synergy  Financial  Group,  Inc.  (the
"Company")  conform to accounting  principles  generally  accepted in the United
States of America and to predominant practice within the banking industry.

The consolidated  financial  statements  include the accounts of the Company and
its wholly-owned  subsidiaries,  Synergy Bank (the "Bank") and Synergy Financial
Services, Inc. All significant inter-company accounts and transactions have been
eliminated  in  consolidation.  Certain  amounts  previously  reported have been
reclassified to conform to the current year's presentation.

The accompanying  unaudited  condensed  consolidated  financial  statements were
prepared in accordance with  instructions to Form 10-Q, and,  therefore,  do not
include  information  or  footnotes  necessary  for a complete  presentation  of
financial position,  results of operations,  changes in equity and cash flows in
conformity with accounting principles generally accepted in the United States of
America.  However,  all normal  recurring  adjustments  that,  in the opinion of
management,  are necessary for a fair presentation of the consolidated financial
statements  have been included.  These  financial  statements  should be read in
conjunction  with  the  audited   consolidated   financial  statements  and  the
accompanying  notes thereto included in the Company's Annual Report on Form 10-K
for the period ended  December  31, 2005.  The results for the nine months ended
September  30, 2006 are not  necessarily  indicative  of the results that may be
expected for the fiscal year ending December 31, 2006 or any other period.

In preparing the financial statements,  management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities,  the
disclosure  of  contingent  assets and  liabilities  at the date of the  balance
sheets,  and the reported  amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

The principal  estimates that are susceptible to significant  change in the near
term relate to the allowance for loan losses.  The evaluation of the adequacy of
the allowance for loan losses  includes an analysis of the individual  loans and
overall risk  characteristics  and size of the different  loan  portfolios,  and
takes into consideration current economic and market conditions,  the capability
of specific borrowers to pay specific loan obligations,  as well as current loan
collateral  values.  However,  actual losses on specific  loans,  which also are
encompassed in the analysis, may vary from estimated losses.

Statement of Financial  Accounting Standards ("SFAS") No. 131, Disclosures About
Segments of an Enterprise and Related Information, establishes standards for the
way business  enterprises  report information about operating segments in annual
financial  statements.  The Company has one operating segment and,  accordingly,
has one reportable segment, "Community Banking." All of the Company's activities
are interrelated,  and each activity is dependent and assessed based on how each
of the activities of the Company  supports the others.  For example,  commercial
lending is  dependent  upon the  ability of the Bank to fund  itself with retail
deposits and other  borrowings and to manage interest rate and credit risk. This
situation  is  also  similar  for  consumer,   residential,   multi-family   and
non-residential  mortgage  lending.   Accordingly,   all  significant  operating
decisions are based upon analysis of the Company as one operating segment.

                                      -5-

<PAGE>

                 SYNERGY FINANCIAL GROUP, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (unaudited)


2. EARNINGS PER SHARE

Basic  earnings  per share is computed by dividing  income  available  to common
stockholders by the weighted average number of common shares outstanding for the
period.  Diluted  earnings per share reflects the potential  dilution that could
occur if  securities  or other  contracts  to issue  common stock (such as stock
options)  were  exercised  or resulted in the  issuance of common  stock.  These
potentially  dilutive  shares would then be included in the  weighted  number of
shares outstanding for the period using the treasury stock method. Shares issued
and shares  re-acquired  during any period are  weighted  for the portion of the
period that they were outstanding.

The  computation  of both basic and  diluted  earnings  per share  includes  the
Employee  Stock   Ownership  Plan  ("ESOP")  shares   previously   allocated  to
participants  and shares committed to be released for allocation to participants
and restricted stock plan ("RSP") shares that have vested or have been allocated
to participants.  ESOP and RSP shares that have been purchased but not committed
to be released have not been considered in computing basic and diluted  earnings
per share.

The following is a  reconciliation  of the  numerators and  denominators  of the
basic and diluted earnings per share computation (in thousands, except per share
data):

<TABLE>
<CAPTION>
                                                                 For the Three Months Ended September 30, 2006
                                                                 ---------------------------------------------
                                                                                    Weighted
                                                               Income            average shares              Per
                                                             (numerator)          (denominator)         share amount
                                                             -----------          -------------         ------------
<S>                                                         <C>                     <C>               <C>
    Basic earnings per share:
       Income available to common stockholders                $     981               10,379            $    0.09
       Effect of dilutive common stock equivalents                    0                  495                 0.00
                                                              ---------               ------            ---------
    Diluted earnings per share:
       Income available to common stockholders                $     981               10,874            $    0.09
                                                              =========               ======            =========
</TABLE>

<TABLE>
<CAPTION>
                                                                 For the Three Months Ended September 30, 2005
                                                                 ---------------------------------------------
                                                                                    Weighted
                                                               Income            average shares              Per
                                                             (numerator)          (denominator)         share amount
                                                             -----------          -------------         ------------
<S>                                                          <C>                     <C>               <C>
    Basic earnings per share:
       Income available to common stockholders                $   1,108               10,711            $    0.10
       Effect of dilutive common stock equivalents                    0                  391                 0.00
                                                              ---------               ------            ---------
    Diluted earnings per share:
       Income available to common stockholders                $   1,108               11,102            $    0.10
                                                              =========               ======            =========
</TABLE>

                                      -6-

<PAGE>

                 SYNERGY FINANCIAL GROUP, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                 For the Nine Months Ended September 30, 2006
                                                                 --------------------------------------------
                                                                                    Weighted
                                                               Income            average shares              Per
                                                             (numerator)          (denominator)         share amount
                                                             -----------          -------------         ------------
<S>                                                          <C>                     <C>               <C>
    Basic earnings per share:
       Income available to common stockholders                $   3,090               10,350            $    0.30
       Effect of dilutive common stock equivalents                    0                  474                (0.01)
                                                              ---------               ------            ---------

    Diluted earnings per share:
       Income available to common stockholders                $   3,090               10,824            $    0.29
                                                              =========               ======            =========
</TABLE>

<TABLE>
<CAPTION>
                                                                 For the Nine Months Ended September 30, 2005
                                                                 --------------------------------------------
                                                                                    Weighted
                                                               Income            average shares              Per
                                                             (numerator)          (denominator)         share amount
                                                             -----------          -------------         ------------

    Basic earnings per share:
<S>                                                           <C>                       <C>               <C>
       Income available to common stockholders                $   3,333               10,993            $    0.30
       Effect of dilutive common stock equivalents                    0                  397                (0.01)
                                                              ---------               ------            ---------

    Diluted earnings per share:
       Income available to common stockholders                $   3,333               11,390            $    0.29
                                                              =========               ======            =========
</TABLE>


3. STOCK-BASED COMPENSATION

Effective  January  1, 2006,  the  Company  adopted  SFAS  123(R),  "Share-Based
Payment."  Under the  accounting  requirements,  the Company is now  required to
recognize  compensation expenses related to stock options outstanding based upon
the fair value of such  awards at the date of grant  over the  period  that such
awards are earned.  For the three months ended  September 30, 2006,  the Company
recognized  approximately $169,000 of compensation expense relating to its stock
option plans and approximately $40,000 of income tax benefit resulting from this
expense for that period.  For the nine months  ended  September  30,  2006,  the
Company recognized  approximately  $497,000 of compensation  expense relating to
its stock  option  plans  and  approximately  $121,000  of  income  tax  benefit
resulting from this expense for that period.

At the  Annual  Meeting  held on April 22,  2003,  stockholders  of the  Company
approved the Company's 2003 Stock Option Plan making available 165,746 shares of
common stock for granting  under the plan.  Prior to April 22, 2003, the Company
did not have a stock option plan.  Under the 2003 Stock Option Plan,  each stock
option granted entitles the holder to purchase one share of the Company's common
stock at an exercise  price of not less than the fair market value of a share of
common stock at the date of grant.  Options granted vest over a five-year period
from the date of grant and will  expire  no later  than 10 years  following  the
grant date. During the year ended December 31, 2003, the Company granted 165,746
options to purchase common shares of the Company. As a result of the January 20,
2004 second-step mutual-to-stock conversion, the shares associated with the 2003
Stock Option Plan converted at the exchange ratio of 3.7231 to 617,086 shares.

                                      -7-

<PAGE>

                 SYNERGY FINANCIAL GROUP, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (unaudited)


At the Annual Meeting held on August 25, 2004 and reconvened on August 31, 2004,
stockholders of the Company approved the Company's 2004 Stock Option Plan making
available  703,591  shares for  granting  under the plan.  During the year ended
December 31, 2004, the Company granted 694,569 options to purchase common shares
of the  Company.  Under the 2004 Stock Option  Plan,  each stock option  granted
entitles  the holder to purchase one share of the  Company's  common stock at an
exercise price of not less than the fair market value of a share of common stock
at the date of grant. Options granted vest over a five-year period from the date
of grant and will expire no later than 10 years following the grant date.

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes  options price model. The following  weighted average  assumptions
were  utilized for grants in 2006,  which have a weighted  average fair value of
$3.59:  dividend  yield of  1.50%;  expected  volatility  of  25.47%;  risk-free
interest  rate of 4.63%;  and, an expected  life of five  years.  The  following
weighted  average  assumptions  were  utilized for grants in 2005,  which have a
weighted  average  fair  value  of  $3.40:  dividend  yield of  2.00%;  expected
volatility of 32.51%; risk-free interest rate of 3.83%; and, an expected life of
five years. The following weighted average  assumptions were utilized for grants
in 2004,  which have a weighted  average fair value of $3.04:  dividend yield of
1.60%; expected volatility of 32.85%;  risk-free interest rate of 3.33%; and, an
expected life of five years.  The following  weighted  average  assumptions were
utilized for grants in 2003,  which have a weighted average fair value of $1.80:
dividend yield of 0.00%; expected volatility of 29.44 %; risk-free interest rate
of 3.01%; and, an expected life of five years.

As of September 30, 2006, there were approximately $1.8 million and $2.3 million
of total  unrecognized  compensation  expense relating to unvested stock options
and  unvested  restricted  stock  plan  shares,  respectively.  These  costs are
expected to be recognized  over a weighted  average period of 2.6 years for both
the stock option plans and restricted stock plans.

The Company  continues  to recognize  compensation  expense for shares of common
stock awarded under the  restricted  stock plans over the vesting  period at the
fair  market  value of the shares on the dates they are  awarded.  For the three
months ended September 30, 2006 and 2005, the Company  recognized  approximately
$212,000 and $202,000,  respectively,  of compensation  expense  relating to the
restricted stock plans, and approximately $76,000 and $73,000,  respectively, of
income tax benefit  resulting from this expense for these periods.  For the nine
months ended September 30, 2006 and 2005, the Company  recognized  approximately
$623,000 and $608,000,  respectively,  of compensation  expense  relating to the
restricted stock plans, and approximately  $224,000 and $219,000,  respectively,
of income tax benefit resulting from this expense for these periods.

                                      -8-

<PAGE>

                 SYNERGY FINANCIAL GROUP, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (unaudited)


The  following  is a summary of the  Company's  stock  option plans for the nine
months ended September 30, 2006:

                                                     Weighted
                                                     Average
                                        Shares    Exercise Price
                                        ------    --------------
Outstanding at beginning of period    1,213,301    $    8.25
Granted                                  83,500        13.50
Exercised                               (38,155)        5.61
Forfeited                                (2,000)       10.15
Expired                                       -            -
                                      ---------    ---------
Outstanding at end of period          1,256,646    $    8.68
                                      =========    =========
Exercisable at end of period            541,032    $    7.57
                                      =========    =========
Weighted average remaining
    contractual life                       7.5 years
Aggregate intrinsic value for
    exercisable options                    $    8.27

The following is a summary of the Company's  restricted stock plans for the nine
months ended September 30, 2006:

                                                    Weighted
                                                    Average
                                                   Grant Date
                                       Shares      Fair Value
                                       ------      ----------
Outstanding at beginning of period    334,560      $    8.84
Granted                                27,200          13.50
Vested                                (91,424)          8.46
Forfeited                                (250)         13.50
Expired                                     -              -
                                      -------      ---------
Outstanding at end of period          270,086      $    9.43
                                      =======      =========


The Company has established an ESOP covering eligible employees with one year of
service, as defined by the ESOP. The Company accounts for the ESOP in accordance
with the  American  Institute  of  Certified  Public  Accountants'  Statement of
Position  ("SOP") No. 93-6,  Employers'  Accounting for Employee Stock Ownership
Plans.  SOP No. 93-6  addresses  the  accounting  for shares of stock  issued to
employees  by  an  ESOP.  SOP  No.  93-6  requires  that  the  employer   record
compensation  expense in the amount equal to the fair value of shares  committed
to be released from the ESOP to employees.

Compensation  expense for the ESOP is recorded at an amount  equal to the shares
allocated by the ESOP  multiplied by the average fair market value of the shares
during the year. The Company  recognizes  compensation  expense ratably over the
year for the ESOP  shares  to be  allocated  based  upon the  Company's  current
estimate  of the number of shares  expected to be  allocated  by the ESOP during
each calendar year. The difference between the average fair market value and the
cost of the  shares  allocated  by the  ESOP is  recorded  as an  adjustment  to
additional paid-in-capital.

                                      -9-

<PAGE>

                 SYNERGY FINANCIAL GROUP, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (unaudited)


4. RECENT ACCOUNTING PRONOUNCEMENTS

In February 2006, the Financial  Accounting Standards Board ("FASB") issued SFAS
No. 155,  "Accounting  for Certain  Hybrid  Instruments:  an  amendment  of FASB
Statements No. 133 and 140." SFAS No. 155 allows financial instruments that have
embedded  derivatives  to be accounts  ofr as a whole  (eliminating  the need to
bifurcate the derivative  from its host) if the holder elects to account for the
whole  instruments  on a fair value basis.  This  Statement is effective for all
financial  instruments  acquired or issued  after the  beginning  of an entity's
first fiscal year that begins  after  September  15, 2006.  The Company does not
expect the adoption of this Statement to have a material effect on the Company's
results of operations or financial condition.

In March  2006,  the FASB  issued SFAS No. 156,  "Accounting  for  Servicing  of
Financial Assets." This Statement amends SFAS No. 140, "Accounting for Transfers
and  Servicing of Financial  Assets and  Extinguishments  of  Liabilities,"  and
requires  that  all  separately   recognized   servicing  assets  and  servicing
liabilities be initially measured at fair value, if practicable, and permits the
entities  to elect  either  fair value  measurement  with  changes in fair value
reflected in earnings or the  amortization  and impairment  requirements of SFAS
No. 140 for subsequent  measurement.  The  subsequent  measurement of separately
recognized  servicing assets and servicing  liabilities at fair value eliminates
the necessity for entities  that manage the risks  inherent in servicing  assets
and  servicing  liabilities  with  derivatives  to qualify for hedge  accounting
treatment  and  eliminates  the  characterization  of  declines in fair value as
impairments  or  direct  write-downs.  This  Statement  is  effective  as of the
beginning of an entity's first fiscal year that begins after September 15, 2006.
The Company is evaluating the impact,  if any, of the adoption of this Statement
on its financial results.

In June 2006, the FASB issued FASB Interpretation No. ("FIN") 48 "Accounting for
Uncertainty in Income Taxes - an  interpretation  of FASB Statement No. 109," to
clarify  certain  aspects of accounting for uncertain tax  positions,  including
issues related to the  recognition  and measurement of those tax positions taken
or  expected  to be taken in a tax  return.  FIN 48 also  provides  guidance  on
de-recognition,  classification,  interest and penalties,  accounting in interim
periods, disclosure, and transition. This interpretation is effective for fiscal
years  beginning  after  December  15,  2006.  The  Company is in the process of
evaluating  the impact of the adoption of this  interpretation  on the Company's
results of operations and financial condition.

In September 2006, the FASB issued SFAS No. 157, "Fair Value  Measurements." The
Statement  defines fair value,  establishes a framework for measuring fair value
in generally accepted accounting  principles  ("GAAP"),  and expands disclosures
about fair  value  measurements.  This  Statement  is  effective  for  financial
statements  issued for fiscal years  beginning  after  November  15,  2007,  and
interim periods within those fiscal years. The adoption of this Statement is not
expected to have a material  effect on the  Company's  results of  operations or
financial condition.

Staff  Accounting  Bulletin  No.  108  ("SAB  108")  provides  guidance  on  the
consideration of the effects of prior year financial statement  misstatements in
quantifying current year misstatements for the purpose of assessing materiality.
Diversity in practice  currently  exists as to quantifying  financial  statement
misstatements.  Therefore, the potential under current practice for the build up
of improper  amounts on the balance sheet has been reviewed and  addressed.  The
Company is reviewing this  accounting  bulletin,  but has not yet determined the
effect of adopting SAB 108,  which is effective for years ending after  November
15, 2006.

                                      -10-

<PAGE>

                 SYNERGY FINANCIAL GROUP, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (unaudited)


5. INVESTMENT SECURITIES

The  amortized  cost,  gross  unrealized  gains and losses and fair value of the
Company's investment securities  available-for-sale  and held-to-maturity are as
follows (in thousands):

                                               September 30, 2006
                                ------------------------------------------------
                                               Gross         Gross
                                Amortized    unrealized    unrealized      Fair
                                  cost         gains         losses        value
                                ------------------------------------------------
Available-for-sale
  U.S. government obligations   $ 1,999       $     -       $   (82)     $ 1,917
  Mortgage-backed securities:
    FHLMC                        48,799             2        (1,192)      47,609
    FNMA                         21,715             5          (549)      21,171
  Equity securities               2,000             -           (57)       1,943
                                -------       -------       -------      -------
    Total                       $74,513       $     7       $(1,880)     $72,640
                                =======       =======       =======      =======


                                               September 30, 2005
                                ------------------------------------------------
                                               Gross         Gross
                                Amortized    unrealized    unrealized      Fair
                                  cost         gains         losses        value
                                ------------------------------------------------
Held-to-maturity
  Mortgage-backed securities:
    FHLMC                       $33,795       $     -       $(1,025)     $32,770
    FNMA                         45,314             1        (1,157)      44,158
    GNMA                          2,463             5           (47)       2,421
  Other debt securities              10             -             -           10
                                -------       -------       -------      -------
    Total                       $81,582       $     6       $(2,229)     $79,359
                                =======       =======       =======      =======


                                               December 31, 2005
                                ------------------------------------------------
                                               Gross         Gross
                                Amortized    unrealized    unrealized      Fair
                                  cost         gains         losses        value
                                ------------------------------------------------
Available-for-sale
  U.S. government obligations   $ 2,000       $     -       $   (94)     $ 1,906
  Mortgage-backed securities:
    FHLMC                        56,076             1        (1,331)      54,746
    FNMA                         28,334             5          (612)      27,727
  Equity securities               1,000             -           (60)         940
                                -------       -------       -------      -------
      Total                     $87,410       $     6       $(2,097)     $85,319
                                =======       =======       =======      =======

                                      -11-

<PAGE>

                 SYNERGY FINANCIAL GROUP, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (unaudited)


                                               December 31, 2005
                                ------------------------------------------------
                                               Gross         Gross
                                Amortized    unrealized    unrealized      Fair
                                  cost         gains         losses        value
                                ------------------------------------------------
Held-to-maturity
  Mortgage-backed securities:
    FHLMC                         $39,234     $     -       $  (976)     $38,258
    FNMA                           53,469           4        (1,059)      52,414
    GNMA                            2,908          11           (26)       2,893
  Other debt securities                10           -             -           10
                                  -------     -------       -------      -------
      Total                       $95,621     $    15       $(2,061)     $93,575
                                  =======     =======       =======      =======


6. LOANS RECEIVABLE

Major groupings of loans are as follows (in thousands):

                                                   September 30,    December 31,
                                                       2006             2005
                                                   -----------------------------
   Mortgages:
     Residential, 1-4 family                         $242,640          $243,188
     Multi-family / non-residential                   314,243           271,600
      Construction                                      9,763             9,525
   Automobile                                         153,509           185,812
   Commercial                                          51,454            24,794
   Other consumer                                       3,471             3,830
                                                     --------          --------

   Loans receivable                                   775,080           738,749
   Deferred loan fees and costs                            87               197
   Allowance for loan losses                           (6,032)           (5,763)
                                                     --------          --------

   Loans receivable, net                             $769,135          $733,183
                                                     ========          ========


A summary of the  activity  in the  allowance  for loan losses is as follows (in
thousands):

                                                     For the Nine Months Ended
                                                  ------------------------------
                                                   September 30,   September 30,
                                                        2006            2005
                                                  ------------------------------

   Balance, beginning of period                       $5,763          $4,427
   Provision for loan losses                             868           1,314
   Recoveries                                            345             240
   Loans charged-off                                    (944)           (585)
                                                      ------          ------

   Balance, end of period                             $6,032          $5,396
                                                      ======          ======


                                      -12-

<PAGE>

                 SYNERGY FINANCIAL GROUP, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                   (unaudited)


7. DEPOSITS

Deposits are summarized as follows (in thousands):

                                                  September 30,   December 31,
                                                      2006            2005
                                                  ------------------------------
     Non-interest-bearing checking accounts         $ 58,953        $ 58,152
     Interest-bearing checking accounts                1,535           3,320
     Savings and club accounts                        49,619          60,608
     Money market accounts                           126,956         117,930
     Certificate of deposit accounts                 398,266         366,461
                                                    --------        --------
                                                    $635,329        $606,471
                                                    ========        ========

8. OTHER BORROWED FUNDS

1. Short-Term Borrowings
   ---------------------

Short-term  borrowings,  which  consist  primarily  of  Federal  Home  Loan Bank
("FHLB") advances,  generally have maturities of less than one year. The details
of these borrowings are presented below (in thousands, except percentages):

<TABLE>
<CAPTION>
                                                                       At or For The
                                                                 ----------------------------
                                                                  Nine Months   Twelve Months
                                                                     Ended          Ended
                                                                 September 30,  December 31,
                                                                     2006           2005
                                                                 ----------------------------
<S>                                                               <C>           <C>
Average balance outstanding                                         $70,403       $ 75,411
Maximum amount outstanding at any month end during the period        93,950        115,000
Balance outstanding at period end                                    93,950         86,650
Weighted average interest rate during the period                       5.15%          3.59%
Weighted average interest rate at period end                           5.54%          4.13%
</TABLE>

2. Long-Term Borrowings
   --------------------

At September 30, 2006,  long-term  borrowings,  which consist of FHLB  advances,
totaled $160.8 million. Advances consist of fixed-rate advances that will mature
within one to nine years.  The  advances  are  collateralized  by FHLB stock and
certain first mortgage loans,  first-lien home equity loans and  mortgage-backed
securities. These advances had a weighted average interest rate of 3.99%.

As of  September  30,  2006,  long-term  FHLB  advances  mature as  follows  (in
thousands):

   2006                                                    $  8,000
   2007                                                      57,000
   2008                                                      45,100
   2009                                                       8,000
   2010                                                      10,000
   Thereafter                                                32,700
                                                           --------
                                                           $160,800
                                                           ========

                                      -13-

<PAGE>

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations


General

         Management's discussion and analysis of financial condition and results
of  operations  is  intended  to  provide   assistance  in   understanding   our
consolidated  financial condition and results of operations.  The information in
this section should be read with the consolidated  interim financial  statements
and the notes thereto included in this Form 10-Q.

         Our results of operations  are primarily  dependent on our net interest
income.  Net interest  income is a function of the balances of  interest-earning
assets  outstanding in any one period, the yields earned on those assets and the
interest paid on deposits and borrowed funds that were  outstanding in that same
period.  To a lesser extent,  the relative  levels of our other income and other
expenses  also  affect our  results of  operations.  Our other  income  consists
primarily of fees and service  charges,  commissions and gains and losses on the
sale of loans and investments.  The other expenses consist primarily of employee
compensation  and benefits,  occupancy and equipment  expenses,  data processing
costs,  marketing  costs,  professional  fees,  office  supplies,  telephone and
postage costs. Our results of operations are also significantly  impacted by the
amount of provisions for loan losses which, in turn, are dependent  upon,  among
other things,  the size and makeup of the loan portfolio,  loan quality and loan
trends.


Forward-Looking Statements

         This report  contains  certain  forward-looking  statements  within the
meaning  of  Section  27A of  the  Securities  Act  of  1933,  as  amended  (the
"Securities  Act"), and Section 21 E of the Securities  Exchange Act of 1934, as
amended  (the  "Exchange  Act").   The  Company  intends  such   forward-looking
statements  to be  covered by the safe  harbor  provisions  for  forward-looking
statements  contained in the Private  Securities  Litigation Reform Act of 1995,
and is including this statement for the purpose of these safe harbor provisions.
Forward-looking statements,  which are based on certain assumptions and describe
future  plans,  strategies  and  expectations  of  the  Company,  are  generally
identified  by use of the words  "believe,"  "expect,"  "intend,"  "anticipate,"
"estimate," "project," or similar expressions.  The Company's ability to predict
results  or the  actual  effect  of future  plans or  strategies  is  inherently
uncertain.  Factors which could have a material adverse effect on the operations
of the Company and its subsidiaries  include, but are not limited to, changes in
interest rates,  general economic  conditions,  legislative/regulatory  changes,
monetary and fiscal policies of the U.S.  Government,  including policies of the
U.S.  Treasury and the Federal Reserve Board,  the quality or composition of the
loan  or  investment  portfolios,  demand  for  loan  products,  deposit  flows,
competition,  demand for  financial  services in the  Company's  market area and
accounting  principles and guidelines.  These risks and uncertainties  should be
considered in evaluating  forward-looking  statements and undue reliance  should
not be placed on such statements. Further information concerning the Company and
its business,  including  additional  factors that could  materially  affect the
Company's  financial  results,  is included in the  Company's  filings  with the
Securities and Exchange Commission ("SEC").

         The  Company  does  not  undertake  - and  specifically  disclaims  any
obligation - to release  publicly the results of any revisions which may be made
to any  forward-looking  statements to reflect events or circumstances after the
date  of  such  statements  or to  reflect  the  occurrence  of  anticipated  or
unanticipated events.

                                      -14-

<PAGE>

Critical Accounting Policies, Judgments and Estimates

       The  accounting  and reporting  policies of the Company  conform with the
accounting  principles  generally  accepted in the United  States of America and
with general practices within the financial services  industry.  The preparation
of the financial  statements in conformity with accounting  principles generally
accepted in the United States of America  requires  management to make estimates
and assumptions that affect the amounts reported in the financial statements and
the accompanying notes. Actual results could differ from those estimates.

       Allowance for Loan Losses.  The Company recognizes that the determination
of the  allowance  for loan  losses  involves a higher  degree of  judgment  and
complexity than its other significant  accounting  policies.  The balance in the
allowance  for loan  losses  is  determined  based on  management's  review  and
evaluation of the loan portfolio in relation to past loss  experience,  the size
and composition of the portfolio,  current  economic events and conditions,  and
other  pertinent  factors,  including  management's  assumptions  as  to  future
delinquencies, recoveries and losses. All of these factors may be susceptible to
significant  change.  To the extent  actual  outcomes  differ from  management's
estimates,  additional  provisions  for loan losses may be  required  that would
adversely impact earnings in future periods.

       Intangible  Assets.  Intangible  assets,  such as  goodwill  and the core
deposit  intangible  associated with the Company's  January 2003  acquisition of
First Bank of Central Jersey, are subject to annual impairment tests and, in the
case of the core deposit intangible,  amortization of the asset through a charge
to expense.  To the extent the outcome of the  impairment  tests differ from the
carrying  value,  additional  charges to expense could be required to reduce the
carrying value, which would adversely impact earnings in future periods.

       Income  Taxes.  Under the  liability  method,  deferred  tax  assets  and
liabilities  are  determined  based  on the  difference  between  the  financial
statement  and tax basis of assets  and  liabilities.  Deferred  tax  assets are
subject to  management's  judgment  based upon  available  evidence  that future
realization is more likely than not. If management  determines  that the Company
may be unable  to  realize  all or part of the net  deferred  tax  assets in the
future,  a direct  charge to income tax  expense  may be  required to reduce the
recorded value of the net deferred tax assets to the expected realizable amount,
thereby impacting earnings.
Comparison of Financial Condition at September 30, 2006 and December 31, 2005

       Assets.  Total assets  reached  $993.3  million on September 30, 2006, an
increase of 2.0%, or $19.4  million,  from $973.9  million on December 31, 2005.
This  growth  was  primarily  attributable  to an  increase  in net loans and in
bank-owned  life  insurance,   partially  offset  by  a  decline  in  investment
securities.

       Between December 31, 2005 and September 30, 2006,  investment  securities
decreased $26.7 million,  or 14.8%, from $180.9 million to $154.2 million.  This
decrease was due to maturities  and principal  repayments  during the first nine
months of 2006. FHLB stock holdings  decreased  3.2%, or $0.4 million,  to $12.8
million at September 30, 2006, from $13.2 million at December 31, 2005.

       Net  loans  increased  4.9%,  or $35.9  million,  to  $769.1  million  at
September  30,  2006,  from $733.2  million at December  31,  2005.  This growth
includes $45.8 million in  originations  and purchased  loans,  net of principal
repayments, offset by $9.1 million in participation loan sales, the amortization
of the premium on  purchased  loans and net  deferred  loan costs,  along with a
provision of $868,000  recorded to the  allowance  for loan  losses.  During the
first quarter of 2006, the Bank sold approximately $9.1 million of participation
loans  that  were  providing  yields  below  current  market  levels.  The  most
significant  changes  during the nine months  ended  September  30, 2006 were in
multi-family/non-residential   mortgage  and  commercial  loans.   Multi-family/
non-residential  mortgages  increased  by $42.6  million,  or  15.7%,  to $314.2
million,  while commercial loans increased by $26.7 million, or 107.5%, to $51.5
million.  Automobile loans declined $32.3 million,  or 17.4%, to

                                      -15-

<PAGE>

$153.5   million,   as   greater   emphasis   was  placed  on   commercial   and
multi-family/non-residential mortgage products.

       On September 30, 2006,  total loans of $775.1  million were  comprised of
40.5% in  multi-family/non-residential  mortgage loans, 20.2% in consumer loans,
comprised  mostly of  direct  automobile  loans for both new and used  vehicles,
16.6% in one-to-four  family real estate loans, 14.6% in home equity loans, 6.8%
in commercial loans and 1.3% in construction loans.

       The  allowance  for  loan  losses was $6.0 million at September 30, 2006,
compared to $5.8  million at December 31, 2005.  This  reflects a provision  for
loan losses of $868,000  for the  nine-month  period ended  September  30, 2006,
offset by net  charge-offs  of  $599,000.  The ratio of the  allowance  for loan
losses to total  loans was 0.78% on both  September  30, 2006 and  December  31,
2005.  Non-performing assets represented 0.13% of total assets on June 30, 2006,
compared to 0.04% on December 31, 2005.  The increase was  primarily  due to the
placement of an $825,000  non-residential loan into non-performing status during
the third quarter of 2006.

       Liabilities.  Total  liabilities  increased  $18.2  million,  or 2.1%, to
$896.8 million at September 30, 2006,  from $878.6 million at December 31, 2005.
The increase in total liabilities  resulted  primarily from an increase of $28.8
million, or 4.8%, in deposits, partially offset by a decline in FHLB advances of
$11.9 million, or 4.4%. The balance of the change was attributable to a increase
in total other liabilities of $1.2 million, or 20.4%.

       Deposits  reached  $635.3  million at September  30, 2006, an increase of
$28.8 million,  or 4.8%, from the $606.5 million  reported at December 31, 2005.
This growth resulted from increases in certificates of deposit of $31.8 million,
or 8.7%, from the $366.5 million reported at year-end 2005, while core deposits,
which consist of checking,  savings and money market  accounts,  decreased  $3.0
million,  or 1.2%.  At September  30,  2006,  brokered  certificates  of deposit
totaled $36.3 million, an increase of $12.7 million from December 31, 2005.

       The $11.9 million decrease in FHLB advances between December 31, 2005 and
September 30, 2006 was primarily due to the growth in deposits.

         Equity.  Stockholders'  equity  totaled  $96.5 million at September 30,
2006, an increase of $1.2 million,  or 1.3%,  from $95.3 million at December 31,
2005.  The increase was  attributable  to net income for the period coupled with
the activity  relating to the  Company's  stock based benefit  plans,  partially
offset by the repurchase of 201,893 shares of the Company's common stock in open
market transactions. Additionally, on September 27, 2006, the Company's Board of
Directors  declared a quarterly  cash dividend of $0.06 per common share,  which
was payable on October 27, 2006 to stockholders of record on October 13, 2006.

    The  repurchase of shares  associated  with the Company's  stock  repurchase
programs  resulted in a  cumulative  reduction in  stockholders'  equity of $2.7
million.  The  decrease in  accumulated  other  comprehensive  loss,  net of tax
effect, totaled $142,000.

                                      -16-

<PAGE>

Average Balance Sheet.  The following  table sets forth certain  information for
the three months ended September 30, 2006 and 2005. The average yields and costs
are  derived by dividing  income or expense by the average  balance of assets or
liabilities,  respectively,  for the periods  presented.  Average  balances  are
derived from daily  average  balances.  The table does not include the allowance
for loan losses in the average balances of loans receivable. Management does not
believe that this causes any material differences in the information presented.

<TABLE>
<CAPTION>
                                                                   For the Three Months Ended September 30,
                                                    ---------------------------------------------------------------------------
                                                                 2006                                      2005
                                                    ---------------------------------       -----------------------------------
                                                    Average                 Average          Average                  Average
                                                    Balance    Interest    Yield/Cost        Balance     Interest    Yield/Cost
                                                    -------    --------    ----------        -------     --------    ----------
<S>                                               <C>          <C>          <C>            <C>            <C>        <C>
Interest-earning assets:
  Loans receivable, net(1)                         $767,496     $12,199        6.36%        $669,363      $ 9,868       5.90%
  Securities(2)                                     156,697       1,577        4.03          206,863        1,934       3.74
  Other interest-earning assets(3)                   11,797         181        6.14           13,510          157       4.65
                                                   --------     -------      ------         --------      -------     ------
     Total interest-earning assets                  935,990      13,957        5.96          889,736       11,959       5.38
Non-interest-earning assets                          46,928                                   40,013
                                                   --------                                 --------
     Total assets                                  $982,918                                 $929,749
                                                   ========                                 ========
Interest-bearing liabilities:
 Checking accounts(4)                              $ 60,217     $     8        0.05%        $ 57,298      $    18       0.13%
 Savings and club accounts                           51,858          71        0.55           64,423           81       0.50
 Money market accounts                              126,417       1,039        3.29          141,421          771       2.18
 Certificates of deposit                            415,456       4,553        4.38          295,656        2,422       3.28
 Other borrowed funds                               231,569       2,627        4.54          270,193        2,517       3.73
                                                   --------     -------      ------         --------      -------     ------
     Total interest-bearing liabilities             885,517       8,298        3.75          828,991        5,809       2.80
Non-interest-bearing liabilities                      2,027     -------                        2,409      -------
                                                   --------                                 --------
     Total liabilities                              887,544                                  831,400
Stockholders' equity                                 95,374                                   98,349
                                                   --------                                 --------
     Total liabilities and stockholders' equity    $982,918                                 $929,749
                                                   ========                                 ========
Net interest income                                             $ 5,659                                   $ 6,150
                                                                =======                                   =======
Net interest rate spread(5)                                                    2.21%                                    2.58%
Net interest margin(6)                                                         2.42%                                    2.76%
Ratio of average interest-earning assets to
   average interest-bearing liabilities                                      105.70%                                  107.33%
</TABLE>
_______________________________
(1)  Non-accruing  loans have been included in loans receivable,  and the effect
     of such inclusion was not material.
(2)  Includes  U.S.  government  obligations,   mortgage-backed  securities  and
     interest-bearing deposits in banks.
(3)  Includes FHLB stock, at cost.
(4)  Includes both interest-bearing and non-interest-bearing checking accounts.
(5)  Net interest  rate spread  represents  the  difference  between the average
     yield on  interest-earning  assets and the average cost of interest-bearing
     liabilities (including non-interest-bearing checking accounts).
(6)  Net  interest  margin  represents  net interest  income as a percentage  of
     average interest-earning assets.

                                      -17-

<PAGE>

Average Balance Sheet.  The following  table sets forth certain  information for
the nine months ended  September 30, 2006 and 2005. The average yields and costs
are  derived by dividing  income or expense by the average  balance of assets or
liabilities,  respectively,  for the periods  presented.  Average  balances  are
derived from daily  average  balances.  The table does not include the allowance
for loan losses in the average balances of loans receivable. Management does not
believe that this causes any material differences in the information presented.

<TABLE>
<CAPTION>
                                                                   For the Nine Months Ended September 30,
                                                    ---------------------------------------------------------------------------
                                                                 2006                                      2005
                                                    ---------------------------------       -----------------------------------
                                                    Average                 Average          Average                  Average
                                                    Balance    Interest    Yield/Cost        Balance     Interest    Yield/Cost
                                                    -------    --------    ----------        -------     --------    ----------
<S>                                               <C>          <C>          <C>           <C>            <C>        <C>
Interest-earning assets:
  Loans receivable, net(1)                         $756,559     $35,456        6.25%        $624,189      $27,210       5.81%
  Securities(2)                                     166,645       4,998        4.00          228,497        6,448       3.76
  Other interest-earning assets(3)                   12,171         526        5.76           12,460          391       4.18
                                                   --------     -------      ------         --------      -------     ------
     Total interest-earning assets                  935,375      40,980        5.84          865,146       34,049       5.25
Non-interest-earning assets                          47,457                                   40,444
                                                   --------                                 --------
     Total assets                                  $982,832                                 $905,590
                                                   ========                                 ========
Interest-bearing liabilities:
 Checking accounts(4)                              $ 61,903     $    31        0.07%        $ 56,074      $    46       0.11%
 Savings and club accounts                           56,635         224        0.53           66,460          248       0.50
 Money market accounts                              117,208       2,444        2.78          151,932        2,374       2.08
 Certificates of deposit                            409,192      12,386        4.04          278,504        6,357       3.04
 Other borrowed funds                               240,701       7,598        4.21          247,794        6,347       3.42
                                                   --------     -------      ------         --------      -------     ------
     Total interest-bearing liabilities             885,639      22,683        3.41          800,764       15,372       2.56
Non-interest-bearing liabilities                      2,530     -------                        3,187      -------
                                                   --------                                 --------
     Total liabilities                              888,169                                  803,951
Stockholders' equity                                 94,663                                  101,639
                                                   --------                                 --------
     Total liabilities and stockholders' equity    $982,832                                 $905,590
                                                   ========                                 ========
Net interest income                                             $18,297                                   $18,677
                                                                =======                                   =======
Net interest rate spread(5)                                                    2.43%                                    2.69%
Net interest margin(6)                                                         2.61%                                    2.88%
Ratio of average interest-earning assets to
   average interest-bearing liabilities                                      105.62%                                  108.04%
</TABLE>
_______________________________
(1)  Non-accruing  loans have been included in loans receivable,  and the effect
     of such inclusion was not material.
(2)  Includes  U.S.  government  obligations,   mortgage-backed  securities  and
     interest-bearing deposits in banks.
(3)  Includes FHLB stock, at cost.
(4)  Includes both interest-bearing and non-interest-bearing checking accounts.
(5)  Net interest  rate spread  represents  the  difference  between the average
     yield on  interest-earning  assets and the average cost of interest-bearing
     liabilities (including non-interest-bearing checking accounts).
(6)  Net  interest  margin  represents  net interest  income as a percentage  of
     average interest-earning assets.

                                      -18-

<PAGE>

Comparison  of Operating  Results for the Three Months Ended  September 30, 2006
and 2005

         Net Income.  Net income  decreased  by $127,000,  to $981,000,  for the
three months ended  September 30, 2006,  compared to $1.108 million for the same
period in 2005, an 11.5% decline.  Diluted net income per common share was $0.09
for the third  quarter of 2006,  compared  to $0.10 for the same period in 2005.
The decrease in net income was primarily  attributable to a $491,000 decrease in
net interest income,  partially offset by an increase in other income of $2,000,
a $192,000  decrease in the  provision  for loan losses,  a $60,000  decrease in
other  expenses and a $110,000  decrease in income tax expense.  Results for the
third  quarter  of 2006  included  $129,000,  or $0.01  per  diluted  share,  in
after-tax stock option expense  associated with the adoption of SFAS No. 123(R),
"Share-Based Payment," which became effective January 1, 2006.

         Net Interest Income. Net interest income declined $491,000, or 8.0%, to
$5.7  million for the three months ended  September  30, 2006,  compared to $6.2
million for the same period in 2005.  Total  interest  income  increased by $2.0
million, to $14.0 million,  for the three months ended September 30, 2006, while
total interest expense increased by $2.5 million, to $8.3 million, when compared
to the same  three-month  period last year. This quarter's  results included the
reversal of approximately  $78,000 of accrued but unpaid interest on an $825,000
non-residential loan placed into non-performing  status during the third quarter
of 2006. The net interest margin for the third quarter of 2006 declined 34 basis
points, to 2.42%, from 2.76% in the same period last year, and declined 24 basis
points,  from  2.66% in the  second  quarter of 2006.  The  linked  quarter  and
year-over-year  decline was the result of margin  compression  stemming from the
prolonged, flat yield curve and increased funding costs, coupled with a slowdown
in asset growth.

         The 16.7%  increase in total  interest  income was  primarily  due to a
$46.3 million, or 5.2%, increase in average  interest-earning  assets,  combined
with a 58 basis point  increase in the average yield earned on these assets when
compared to the same quarter of the prior year. The increase in interest-earning
assets  was a result of the  Company's  growth  strategy.  The  increase  in the
average yield was primarily  attributable  to higher  market  interest  rates on
originated  loans,  a higher  yield on  investment  securities  and an increased
dividend yield on FHLB stock.

         The 42.8% increase in total interest expense primarily  resulted from a
$56.5  million,  or 6.8%,  increase  in  average  interest-bearing  liabilities,
coupled  with a 95 basis  point  increase  in the  average  cost of  funds  when
compared to the same quarter of the prior year. The increase in the average cost
of  interest-bearing  liabilities  was primarily  attributable  to higher market
interest rates, as well as an increase in higher cost  certificates of deposits.
The majority of the  increase in average  interest-bearing  liabilities  for the
quarter  ended  September 30, 2006 was a result of a $119.8  million,  or 40.5%,
increase in the average balance of certificate of deposit accounts.

         Provision  for Loan Losses.  We maintain an  allowance  for loan losses
through  provisions for loan losses that are charged to earnings.  The provision
is made to  adjust  the  total  allowance  for loan  losses  to an  amount  that
represents  management's  best  estimate of incurred and probable  losses in the
loan  portfolio at the balance sheet date that are  reasonable  to estimate.  In
estimating  the  losses  in the  loan  portfolio  that  are  both  probable  and
reasonable  to  estimate,  management  considers  factors  such  as an  internal
analysis of credit  quality,  general levels of loan  delinquencies,  collateral
values,   the  Bank's   historical  loan  loss   experience,   changes  in  loan
concentrations  by loan category,  peer group information and economic and other
trends affecting our market area. The provision established for loan losses each
month reflects management's assessment of these factors in relation to the level
of the  allowance at such time.  Management  allocates  the allowance to various
categories based on its classified  assets,  historical loan loss experience and
its  assessment  of the  risk  characteristics  of each  loan  category  and the
relative  balances at month end of each loan category.  Management's  assessment
did not change either in estimation method or assumptions during either period.

                                      -19-

<PAGE>

         The provision for loan losses  declined by $192,000,  to $200,000,  for
the three months ended September 30, 2006, from $392,000 for the same quarter in
2005.  The decrease in the provision was primarily due to lower loan  production
during the third quarter of 2006 as compared to the same period last year. Total
charge-offs amounted to $375,000 and recoveries amounted to $117,000,  resulting
in a net charge-off  amount of $258,000 for the three months ended September 30,
2006.  This represents a $153,000  increase in net charge-offs  when compared to
the same quarter in 2005.

         Other Income.  Other income increased  $2,000, or 0.2%, to $956,000 for
the three months  ended  September  30, 2006,  compared to $954,000 for the same
quarter in 2005. This was primarily the result of an increase in service charges
and fees on deposit accounts.

         Other  Expenses.  Other expenses  decreased  $60,000,  or 1.2%, to $5.0
million  for the three  months  ended  September  30,  2006.  The  decrease  was
primarily  attributable to a decline in advertising  expenses and lower premises
and equipment expense.  Salaries and benefits increased primarily as a result of
the $169,000 of pre-tax stock option  compensation  expense  associated with the
adoption of SFAS No. 123(R).

         Income Tax Expense. Income tax expense decreased by $110,000, or 19.4%,
during the three  months  ended  September  30,  2006 when  compared to the same
quarter in 2005, due in part to lower taxable income for the 2006 period.

Comparison of Operating Results for the Nine Months Ended September 30, 2006 and
2005

         Net Income. Net income decreased by $243,000,  to $3.1 million, for the
nine months  ended  September  30,  2006,  compared to $3.3 million for the same
period in 2005,  a 7.3%  decline.  Diluted net income per common share was $0.29
for both  periods.  The decrease in net income was primarily  attributable  to a
$380,000  decrease in net interest  income  coupled with a $566,000  increase in
other  expenses,  partially  offset by a $52,000  increase  in other  income,  a
$446,000  decrease in the provision  for loan losses and a $205,000  decrease in
income tax  expense.  Results  for the nine  months  ended  September  30,  2006
included $376,000, or $0.03 per diluted share, in after-tax stock option expense
associated with the adoption of SFAS No. 123(R).

         Net Interest Income. Net interest income declined by $380,000, or 2.0%,
to $18.3 million for the nine months ended September 30, 2006, compared to $18.7
million for the same period in 2005.  Total  interest  income  increased by $6.9
million,  to $41.0 million,  for the nine months ended September 30, 2006, while
total  interest  expense  increased  by $7.3  million,  to $22.7  million,  when
compared to the same nine-month  period last year. Last year's results  included
approximately  $117,000  of loan  prepayment  fees,  which  related to two large
credits,  while this year's  results  included  the  reversal  of  approximately
$78,000  of  accrued  but  unpaid  interest  on an  $825,000  loan  placed  into
non-performing  status during the third quarter of 2006. The net interest margin
for the first nine months of 2006 declined 27 basis points, to 2.61%, from 2.88%
in the same  period  last year.  This  year-over-year  decline was the result of
margin compression  stemming from the prolonged,  flat yield curve and increased
funding costs, coupled with a slowdown in asset growth.

         The 20.4%  increase in total  interest  income was  primarily  due to a
$70.2 million, or 8.1%, increase in average  interest-earning  assets,  combined
with a 59 basis point  increase in the average yield earned on these assets when
compared to the same period last year. The increase in  interest-earning  assets
was a result of the Company's growth strategy. The increase in the average yield
was primarily  attributable to higher market interest rates on originated loans,
a higher yield on investment  securities and an increased dividend yield on FHLB
stock.

         The 47.6% increase in total interest expense primarily resulted from an
$84.9  million,  or 10.6%,  increase  in average  interest-bearing  liabilities,
coupled  with an 85 basis  point  increase  in the  average  cost of funds  when
compared  to the same  period last year.  The  increase  in the average  cost of
interest-bearing   liabilities  was  primarily  attributable  to  higher  market
interest rates, as well as an increase in higher cost

                                      -20-

<PAGE>

certificates   of   deposits.   The   majority   of  the   increase  in  average
interest-bearing liabilities for the first nine months of 2006 was a result of a
$130.7  million,  or 46.9%,  increase in the average  balance of  certificate of
deposit accounts over the same period last year.

         Provision  for Loan Losses.  We maintain an  allowance  for loan losses
through  provisions for loan losses that are charged to earnings.  The provision
is made to  adjust  the  total  allowance  for loan  losses  to an  amount  that
represents  management's  best  estimate of incurred and probable  losses in the
loan  portfolio at the balance sheet date that are  reasonable  to estimate.  In
estimating  the  losses  in the  loan  portfolio  that  are  both  probable  and
reasonable  to  estimate,  management  considers  factors  such  as an  internal
analysis of credit  quality,  general levels of loan  delinquencies,  collateral
values,   the  Bank's   historical  loan  loss   experience,   changes  in  loan
concentrations  by loan category,  peer group information and economic and other
trends affecting our market area. The provision established for loan losses each
month reflects management's assessment of these factors in relation to the level
of the  allowance at such time.  Management  allocates  the allowance to various
categories based on its classified  assets,  historical loan loss experience and
its  assessment  of the  risk  characteristics  of each  loan  category  and the
relative  balances at month end of each loan category.  Management's  assessment
did not change either in estimation method or assumptions during either period.

         The provision for loan losses  declined by $446,000,  to $868,000,  for
the nine months ended  September 30, 2006, from $1.3 million for the same period
in  2005.  The  decrease  in the  provision  was  primarily  due to  lower  loan
production  during the nine months ended  September  30, 2006 as compared to the
same period last year.  Total  charge-offs  amounted to $944,000 and  recoveries
amounted to $345,000,  resulting in a net charge-off  amount of $599,000 for the
nine months ended September 30, 2006. This represents a $254,000 increase in net
charge-offs when compared to the same period in 2005.

         Other Income.  Other income increased $52,000, or 2.0%, to $2.7 million
for the nine months ended  September 30, 2006.  This was primarily the result of
an  increase  of  $53,000  in  other  income,  primarily  from  bank-owned  life
insurance.

         Other Expenses.  Other expenses increased  $566,000,  or 3.8%, to $15.3
million for the nine months ended September 30, 2006,  compared to $14.8 million
for the same period in 2005. The increase was primarily attributable to salaries
and benefits  resulting  from the $497,000 of pre-tax stock option  compensation
expense associated with the adoption of SFAS No. 123(R).

         Income Tax Expense. Income tax expense decreased by $205,000, or 10.6%,
during the nine months ended September 30, 2006 when compared to the same period
in 2005, due primarily to lower taxable income for the 2006 period.

Liquidity

       The Bank maintains liquid assets at levels it considers  adequate to meet
liquidity needs. The liquidity of the Bank reflects its ability to provide funds
to meet loan requests,  accommodate possible outflows in deposits,  fund current
and planned  expenditures  and take advantage of interest rate  opportunities in
connection  with  asset  and  liability  management  objectives.   Funding  loan
requests,  providing  for  liability  outflows and  management  of interest rate
fluctuations  require  continuous  analysis in order to match the  maturities of
earning assets with specific types of deposits and borrowings. Bank liquidity is
normally  considered  in terms of the nature and mix of the Bank's  sources  and
uses of funds.

       The  Bank's  primary   sources  of  liquidity  are  deposits,   scheduled
amortization  and  prepayment  of  loans  and  mortgage-backed   securities.  In
addition,  the  Bank  invests  any  excess  funds  in  overnight  federal  funds
investments, which provide liquidity. Its cash and cash equivalents,  defined as
cash and deposits in other financial  institutions  with original  maturities of
three months or less,  totaled $5.5 million at September  30, 2006.  To a lesser
extent,  the earnings and funds provided from operating  activities are a source
of liquidity.

                                      -21-

<PAGE>

       Liquidity  management is both a daily and long-term  function of business
management.  While scheduled  principal  repayments on loans and mortgage-backed
securities are a relatively  predictable source of funds, deposit flows and loan
and securities  prepayments  are greatly  influenced by general  interest rates,
economic  conditions  and  competition.  If the Bank  requires  funds beyond its
ability to generate them internally,  it has the ability to obtain advances from
the FHLB,  which provides an additional  source of funds. At September 30, 2006,
the  Bank's  borrowing  limit  with  the  FHLB  was  $399.0  million,  excluding
repurchase agreement advances, subject to collateral requirements.  At September
30, 2006,  the Bank had $167.2  million of FHLB advances  outstanding  and $87.5
million in repurchase agreement advances with the FHLB.

       Management is not aware of any trends,  events or uncertainties that will
have  or are  reasonably  likely  to have a  material  effect  on the  Company's
liquidity,  capital or operations nor is it aware of any current  recommendation
by regulatory authorities,  which, if implemented,  would have a material effect
on liquidity,  capital or operations. The total amount of the Bank's commitments
to extend  credit for mortgage and consumer  loans as of September  30, 2006 was
$50.0 million,  excluding  commitments on unused lines of credit,  which totaled
$30.7 million.

       Management  intends to expand the Bank's branch  network  either  through
opening or acquiring branch offices. Three new offices and the relocation of one
branch are planned for late 2006 and 2007.  The Company  will also  consider the
acquisition  of local  financial  institutions  as part of expanding its banking
operations. It does not, however, have any current understandings, agreements or
arrangements  for the expansion of its  business,  other than opening new branch
office locations.

       The following  table discloses the Bank's  contractual  obligations as of
September 30, 2006 (in thousands):

<TABLE>
<CAPTION>
                                              Total           Less Than       1-3 Years     4-5 Years        After
                                                                1 Year                                     5 Years
                                             ---------------------------------------------------------------------
<S>                                         <C>               <C>             <C>            <C>          <C>
Certificates of deposit                      $398,266          $345,949        $ 45,488       $ 6,377      $   452
FHLB advances (1)                             254,750           150,950          61,100        10,000       32,700
Rental under operating leases                  11,711               946           1,697         1,578        7,490
                                             --------          --------        --------       -------      -------
Total                                        $664,727          $497,845        $108,285       $17,955      $40,642
                                             ========          ========        ========       =======      =======
</TABLE>

________________
(1)  At September 30, 2006, other borrowed funds consisted of FHLB advances. The
     Bank's  borrowing  limit  with  the  FHLB  was  $399.0  million,  excluding
     repurchase   agreement  advances,   subject  to  collateral   requirements,
     consisting of an overnight line of credit of $97.6  million,  an adjustable
     rate line of credit of $97.6 million and a regular  advance limit of $203.8
     million.

         The following  table  discloses the Bank's  commitments as of September
30, 2006 (in thousands):

<TABLE>
<CAPTION>
                                              Total           Less Than       1-3 Years     4-5 Years        After
                                                                1 Year                                     5 Years
                                             ---------------------------------------------------------------------
<S>                                         <C>               <C>             <C>            <C>          <C>
Lines of Credit (1)                           $30,744           $ 1,120           $612        $3,230       $25,782
Other commitments to extend credit             50,014            50,014              -             -             -
                                              -------           -------           ----        ------       -------
Total                                         $80,758           $51,134           $612        $3,230       $25,782
                                              =======           =======           ====        ======       =======
</TABLE>
________________
(1)  Represents amounts committed to customers.

                                      -22-

<PAGE>

Regulatory Capital Requirements

         The Bank is subject to federal  regulations that impose certain minimum
capital requirements. Quantitative measures, established by regulation to ensure
capital  adequacy,  require the Bank to maintain  amounts and ratios of tangible
and core  capital to adjusted  total assets and of total  risk-based  capital to
risk-weighted assets. On September 30, 2006, the Bank was in compliance with all
of its  regulatory  capital  requirements.  The  following  table sets forth the
Bank's  capital  position  and  relativity  to  regulatory  requirements  as  of
September 30, 2006:

<TABLE>
<CAPTION>
                                                                                   OTS Requirements
                                                                       ------------------------------------------
                                                                            Minimum            Classification for
                                                 Bank actual           capital adequacy         well-capitalized
                                                 -----------           ----------------         ----------------
                                              Amount      Ratio        Amount      Ratio        Amount      Ratio
                                              ------      -----        ------      -----        ------      -----
<S>                                         <C>          <C>         <C>           <C>        <C>          <C>
Total risk-based capital
   (to risk-weighted assets)                 $94,292      12.28%      $61,431       8.00%      $76,789      10.00%
Tier 1 capital (to risk-weighted assets)      88,260      11.49%          N/A         N/A       46,074       6.00%
Tier 1 capital (to adjusted total assets)     88,260       8.91%       39,626       4.00%       49,532       5.00%
Tangible capital (to adjusted total assets)   88,260       8.91%       14,860       1.50%          N/A         N/A
</TABLE>

Impact of Inflation and Changes Prices

         The consolidated financial statements of the Company and notes thereto,
presented  elsewhere  herein,  have been prepared in accordance  with accounting
principles generally accepted in the United States of America, which require the
measurement of financial  position and operating  results in terms of historical
dollars without considering the change in the relative purchasing power of money
over time and due to  inflation.  The impact of  inflation  is  reflected in the
increased cost of the Company's operations,  primarily those at the Bank. Unlike
most industrial companies,  nearly all of the assets and liabilities of the Bank
are financial.  As a result,  interest rates have a greater impact on the Bank's
performance  than do the effects of general levels of inflation.  Interest rates
do not  necessarily  move in the same  direction  or to the same  extent  as the
prices of goods and services.


Item 3. Quantitative and Qualitative Disclosures About Market Risk

Management of Interest Rate Risk and Market Risk

         Quantitative  Analysis.  Management actively monitors its interest rate
risk  exposure.  The  Bank's  objective  is to  maintain a  consistent  level of
profitability  within  acceptable  risk  tolerances  across  a  broad  range  of
potential  interest  rate  environments.  The Bank  uses the  Office  of  Thrift
Supervision  Net Portfolio Value (NPV) Model to monitor its exposure to interest
rate risk, which calculates  changes in net portfolio value.  Reports  generated
from assumptions  provided and modified by management are reviewed by the Asset/
Liability Management and Budget Committee and reported to the Board of Directors
quarterly. The Interest Rate Sensitivity of Net Portfolio Value Report shows the
degree  to which  balance  sheet  line  items  and the net  portfolio  value are
potentially affected by a 100 to 200 basis point (1/100th of a percentage point)
upward and downward shift (shock) in the Treasury yield curve.

         Management  believes that there has not been a material  adverse change
in market risk during the three-month period ended September 30, 2006.

                                      -23-

<PAGE>

         Qualitative   Analysis.    Because   the   majority   of   the   Bank's
interest-earning  assets  and  interest-bearing  liabilities  are  sensitive  to
changes in interest  rates,  a  significant  form of market risk for the Bank is
interest rate risk, or changes in interest  rates.  The Bank is vulnerable to an
increase  in  interest  rates to the extent  that  interest-bearing  liabilities
mature or re-price more rapidly than interest-earning assets. Our assets include
long-term,  fixed-rate loans and investments, while our primary sources of funds
are deposits and borrowings  with  substantially  shorter  maturities.  Although
having   interest-bearing   liabilities   that  re-price  more  frequently  than
interest-earning  assets is generally beneficial to net interest income during a
period of declining  interest rates,  this type of  asset/liability  mismatch is
generally detrimental during periods of rising interest rates.

         The Board of Directors has  established an  Asset/Liability  Management
and Budget  Committee.  The Committee  meets quarterly with management to review
current  investments:  average lives,  durations and  re-pricing  frequencies of
loans  and  securities;   loan  and  deposit  pricing,  production  volumes  and
alternative  funding  sources;  interest  rate  risk  analysis;   liquidity  and
borrowing needs; and a variety of other asset and liability  management  topics.
The  management  session of the Committee is held monthly with  President  Fiore
presiding and senior management in attendance.  The results of the quarterly and
monthly  meetings of the Committee are reported to the full Board at its regular
meetings. In addition, the Committee generally meets during October and November
each year with the goal of developing an annual  business and operating plan for
presentation to the full Board.

         To reduce the effect of interest  rate changes on net interest  income,
the Bank has adopted various  strategies to enable it to improve the matching of
interest-earning asset maturities to interest-bearing  liability maturities. The
main elements of these strategies include seeking to:

          o    originate loans with adjustable-rate features or fixed-rate loans
               with short  maturities,  such as home equity and consumer  loans,
               comprised mostly of direct automobile loans for both new and used
               vehicles;
          o    expand commercial and industrial loans, which  predominantly have
               variable  rates of  interest;
          o    increase  production in higher  yielding  commercial  real estate
               loans;
          o    lengthen the maturities of time deposits and  borrowings  when it
               would  be cost  effective  through  the  aggressive  pricing  and
               promotion of  certificates  of deposits and  utilization  of FHLB
               advances;
          o    increase core deposits (i.e., checking,  savings and money market
               accounts), which tend to be less interest rate sensitive; and
          o    purchase  intermediate and adjustable-rate  investment securities
               that  provide a stable cash flow,  thereby  providing  investable
               funds in varying interest rate cycles.

Item 4. Controls and Procedures

         Evaluation  of  disclosure  controls  and  procedures.  Based  on their
evaluation of the Company's  disclosure  controls and  procedures (as defined in
Rule 13a-15(e) under the Securities  Exchange Act of 1934 (the "Exchange Act")),
the Company's  principal  executive officer and principal financial officer have
concluded that as of the end of the period  covered by this Quarterly  Report on
Form 10-Q such disclosure controls and procedures are effective.

         Changes in internal  controls.  During the quarter under report,  there
was no change in the Company's  internal  control over financial  reporting that
has  materially  affected,  or is reasonable  likely to materially  affect,  the
Company's internal control over financial reporting.

                                      -24-

<PAGE>

                           PART II - OTHER INFORMATION

 Item 1. Legal Proceedings.
         -----------------

         The Company and its subsidiaries,  from time to time, may be a party to
routine  litigation,  which  arises in the normal  course of  business,  such as
claims to enforce  liens,  condemnation  proceedings  on properties in which the
Bank, the  wholly-owned  subsidiary of the Company,  holds  security  interests,
claims  involving  the making and  servicing  of real  property  loans and other
issues incident to its business.  There were no lawsuits  pending or known to be
contemplated  at  September  30,  2006 that would be expected to have a material
effect on the Company's operations or income.

Item 1A. Risk Factors.
         ------------

         There  has  been no  material  change  in the risk  factors  previously
disclosed in the Company's 2005 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
        -----------------------------------------------------------

                      ISSUER PURCHASES OF EQUITY SECURITIES

The following table reports information  regarding  repurchases of the Company's
common stock  during the third  quarter of 2006 and the stock  repurchase  plans
approved by the Company's Board of Directors.

<TABLE>
<CAPTION>
----------------------------- --------------- ---------------- ------------------------- ----------------------------
                                                                Total Number of Shares    Maximum Number of Shares
                               Total Number                      Purchased as Part of     that May Yet Be Purchased
                                of Shares      Average Price      Publicly Announced         Under the Plans or
                                Purchased     Paid per Share    Plans or Programs (1)           Programs (1)
           Period
----------------------------- --------------- ---------------- ------------------------- ----------------------------
<S>                             <C>             <C>                <C>                     <C>
July 1-31, 2006                     -                -                     -                        470,401
----------------------------- --------------- ---------------- ------------------------- ----------------------------
August 1-31, 2006                   -                -                     -                        470,401
----------------------------- --------------- ---------------- ------------------------- ----------------------------
September 1-30, 2006                -                -                     -                        470,401
----------------------------- --------------- ---------------- ------------------------- ----------------------------
Total                               -                -                     -
----------------------------- --------------- ---------------- ------------------------- ----------------------------
</TABLE>

(1)  On February 23, 2006, the Company  announced that it intends to purchase up
     to five  percent of its common  stock  outstanding  (approximately  572,294
     shares) in open market  transactions.  This repurchase program incorporates
     the  174,628  shares  that  remained  available  for  repurchase  under the
     Company's  August 2005  repurchase  program.  Such purchases are to be made
     from time to time in the open market,  based on stock  availability,  price
     and the  Company's  financial  performance.  This program has no expiration
     date and has 470,401 shares yet to be purchased.

                                      -25-

<PAGE>

Item 3. Defaults Upon Senior Securities.
        -------------------------------

         None.

Item 4. Submission of Matters to a Vote of Security Holders.
        ---------------------------------------------------

         None.

Item 5. Other Information.
        -----------------

         None.


Item 6. Exhibits.
        --------

         a) Exhibits:

          31   Certification  pursuant  to ss.302 of the  Sarbanes-Oxley  Act of
               2002
          32   Certification  pursuant  to ss.906 of the  Sarbanes-Oxley  Act of
               2002

                                      -26-

<PAGE>

                                   SIGNATURES



          Pursuant to the requirements of Sections 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                        SYNERGY FINANCIAL GROUP, INC.



Date: November 9, 2006               By:   /s/John S. Fiore
                                           -------------------------------------
                                           John S. Fiore
                                           President and Chief Executive Officer
                                           (Duly Authorized Representative)

          Pursuant to the  requirement of the  Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the date indicated.

<TABLE>
<CAPTION>

<S>                                     <C>
/s/John S. Fiore                            /s/A. Richard Abrahamian
-------------------------------------       -------------------------------------------------
John S. Fiore                               A. Richard Abrahamian
President and Chief Executive Officer       Senior Vice President and Chief Financial Officer
(Principal Executive Officer)               (Principal Financial and Accounting Officer)

Date: November 9, 2006                      Date: November 9, 2006

</TABLE>

                                      -27-